Like all major financial decisions, we as Chief Financial Officers are expected to understand the intricate details of our employee benefits. Here we are five years after Affordable Care Act has been in effect and many CFOs are just now lifting their head from the sand.
But as we lift our heads out of the sand, this year is an integral year for many employers who are just now being affected by the ACA guidelines.
Compliance Dates Have Changed
Businesses with 50 or more full-time employees or full-time equivalent employees must have a health insurance policy effective by January 1, 2016. These Applicable Large Employers are expected to offer coverage to 95-percent of their eligible employees.
Know Your Exposure
The “big question” for many employers who have never offered coverage: Is it more expensive to provide a health plan or to just pay the employer mandate? Just know that if you do not offer an affordable health insurance policy, you may pay $2,000/employee (minus the first 30). Also, for every employee that receives a subsidy from the healthcare.gov marketplace, you could pay an additional $3,000/employee.
Small Businesses May Be Eligible for Tax Credit
If you do not have 50+ full-time employees or full-time equivalents, then you’re not expected to provide coverage, however, you’re encouraged to do so. For employers who have 25 full-time equivalent employees or less, you could receive a tax credit. Here are some rules that apply:
- a. The average annual salary must be $50,000 or less
- b. The employer must pay at least 50% of the monthly premium
- c. Limited to two years of tax credit
Along with the decision to offer coverage or not offer coverage, each employer who has offered coverage to its employees must provide a Form 1095 to their employees, and a Form 1094 to the IRS.
If the employer is self-funded, they fill out all sections of 1095-C. If they are fully insured, they get a 1095-B from the insurer and fill out Sections I and II of 1095-C.
These new Form 1095s are due March 31st to your employees and the Form 1094s are due to the IRS by May 31st if you’re sending them via snail mail and June 30th if you’re filing them electronically.